Southern Cross cable faces new competitor

Pipe Networks announces undersea cable project

Australian telco Pipe Networks, which operates that country's third-largest fibre-optic communications network, announced today its A$200 million (NZ$227 million) "Project Runway" fibre-optic cable initiative will go ahead.

The project (pdf), in the planning stages since late 2006, involves Pipe building a major 6,900km undersea fibre-optic link between Sydney and Guam, where it will connect to a major international data network junction.

Pipe will on-sell capacity on the new link to other Australian telcos such as Internode and iiNet, which increasingly need more powerful links to keep up with the internet needs of broadband-enabled customers downloading online music and video from overseas.

Pipe Networks managing director Bevan Slattery says the cable is a large piece of infrastructure but is necessary to break the stranglehold the "Gang of Four" hold on capacity into Australia.

The link will compete with others owned by Telstra and the Southern Cross consortium of Telecom NZ, Optus and Verizon. It has the potential to affect Pipe's earnings substantially in the long term, particularly as Pipe has placed a heavy emphasis on signing customer agreements for capacity before the cable was built.

Foundation customers include iiNet, VSNL, Telikom PNG, Internode and Primus.

Pipe's board gave in-principle approval to the project in December, with the company having already appointed Tyco Telecommunications, in August, to build the cable link.

Most other details, such as land-use approvals from the NSW government and Australian military, are also in place. If the project goes ahead, Pipe is scheduled to start connecting customers in the first quarter of 2009.

Pipe's shares went into a trading halt earlier this month, with the company saying it was preparing to make an important announcement relating to Project Runway, which was likely to affect its share price. Pipe declined to comment on the announcement.

— Australian Financial Review

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Tags Southern Cross CableNetworking & Telecomms IDtelecomPipe Networks

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